loft at 244 West 23 Street closes off 28% since 2007 with big roof deck

what a motivated seller looks like
After three days in a row of Manhattan Loft Guy posts about loft resales at curiously strong prices, consideration of the March 16 closing of the Manhattan loft #7A at 244 West 23 Street at $1.65mm is a guaranteed mood changer. It is also my current favorite poster child for the caption “what a motivated seller looks like”. The quickest way to explain that is the listing history, with the knowledge that when these sellers bought it on June 7, 2007 they paid $2.285mm; it looks as though they had 3 good years before deciding to move:

That’s two price drops to get a contract after 7 months at a price that is 28% below what they had paid in the run-up to The Peak, and nearly that down from their original asking price. They gave each of the first two prices a sustained exposure to the market, yet were flexible to drop in significant increments and to negotiate from what must have seemed like an extreme low-ball offer.

The recent broker babble is a little muted, but the space seems to be in tip-top shape, as the 2007 marketing campaign (missing from StreetEasy, alas) is both concise and boastful:

What do you get when you mix gaspworthy prewar architecture, gorgeous views, an impeccable renovation, and a 1,000 sq. ft. decked, irrigated, private roof oasis? hmmm: PERFECTION REALIZED.

happy math, then
That math in 2007 worked out this way: Gasp-worthy Architecture + Views + Impeccable Renovation + Roof Deck = $2.285mm, though it took quite a long time (and one price drop) to work:

From this timeline, it appears that the rising tide of the overall market into 2007 floated this loft sale. Note how long the loft was at $2.5mm, that it still took 3+ months at a new price to get a deal, and that the deal was slightly above ask. Looking back, this one may have been an early indicator of the strength of the overall Manhattan residential real estate market in 2007. But those values did not hold.

The loft suffers from a condition that can thin out the buyer pool pretty quickly, so if I had to pick one ting that might account for the drop from 2007 to 2011 it is that the duplexed “1,600 sq ft” of interior space is a One Bed Wonder (scroll down for my February 27, 2007 introduction of the concept). That “impeccable renovation” resulted in a floor plan suited perfectly for an owner or owners who sleep in the same bed, btu that requires some jiggering to logically create a second permanent sleeping area. Certainly, there should be enough space for that (at “1,600 sq ft”), but a lot would be lost in adding that space. Either it would have a window (breaking up the living room) or would share the downstairs (mis-labeled “basement” on this floor 6 and 7 duplex) near the bathroom, which would deprive the master of a master bath and create a second “bedroom” with no window.

Some One Bed Wonder footprints are much easier to adapt to a multi-bed lifestyle. I can’t think of another reason that the market would so disfavor this loft from June 2007 to March 2011, unless there is no reason because this is just one of those outliers that under-performed The Market.

local comp is recent, limited
The #7A sellers had the benefit of fresh market intelligence when they came to market on June 17 last year, since #5B was then in contract and would close on July 19 at $1.4mm. I won’t wander too far afield with this one, but I will note that if #5A were a poster child the caption would be Death By Tiny Price Cuts, as it came to market on September 10, 2009 at $1.62mm and dropped 6 times by February 18 to get only to $1.375mm. I would be shocked if the #7A sellers did not know the #5B contract price when they started selling (a small loft coop can be a very small village), but if they did not kow in June, they learned after teh July 19 closing that #5B sold for $1.4mm. There are ore adjustments than you’d think to comp #5B as a “1,620 sq ft” duplex against #7A as a “1,600 sq ft” duplex.

The big difference is obvious: the “1,000 sq ft” roof deck for #7A. I read between the babble lines that #7A has a higher level renovation than #5B, but the #5B layout will appeal to many more buyers, as it is a very rational full 2-bedroom with auxiliary space on the bedroom floor (den / media / home office), htough the bathroom set-up means that the 2 bedrooms share the private bathroom.

Comp analysis is more art than science, with no preliminary grades. The Market finally (really) tells you whether you are right or wrong only after you have sold. In this case, retrospect is clear: the #7A sellers mis-read #5B as a comp, unless they hugely over-weighted the roof deck.

In round number terms, you might net out as roughly even the relative merits and demerits of the two lofts, and apply the #5B clearing value of $864/ft to the interior space of #7B. That results in a very similar implied valuation for the #7A interior, of course, of $1,382,716. If you were to riff with The Miller about the value of the roof deck, you might assess the “1,000 sq ft” deck as worth 35% of the interior space on a price-per-foot basis (plus for irrigation, con for stairway access and large size, relatively), in which case you would add another $300,000 to #7A.

Personally, I probably would have valued the #7A interior as superior to the #5B interior, in which case I probably would have placed a higher value on #7A than The Market did.

see how easy to back it out!
Note in the paragraph above how 2 simple assumptions drive an implied value for #7A that is very, very close to the actual market result: (a) assuming that the #5B and #7A interior values are equivalent, as their different strengths and weaknesses cancel out; then (b) assuming that the roof deck is worth about one-third of the interior of #7A.

In retrospect, #5B has a very efficient layout for a multi-bedroom use, and sufficiently nice finishes to achieve a fair 2-bedroom value. In retrospect, #7A was most attractive to a single person or couple who loves to entertain, for whom the “1,600 sq ft” of #7A was not extravagant or wasteful and for whom the “1,000 sq ft” roof terrace might be worth a higher-than-market premium.

As I hinted above, I believe that the 2007-to-2011 comparison for the same loft implies that $1.65mm was a below-market sale, but I am chastened by the fact that The Market had a good long look at it before valuing at $1.65mm. So I am left with the theory that The Market in 2011 is relatively thinner in two market niches (One Bed Wonders and roof decks) to explain a market result I don’t like.

My frustration is nothing to that of the sellers, of course. My hat is off to them for facing up to the cold cruel market realities and getting the best price they could, at the price of a 28% hit.

© Sandy Mattingly 2011